Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change to List and Trade the Shares of the VanEck Vectors Long/Flat Commodity ETF, 42768-42777 [2016-15454]
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Federal Register / Vol. 81, No. 126 / Thursday, June 30, 2016 / Notices
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016–15499 Filed 6–29–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–78150; File No. SR–
NASDAQ–2016–086]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2016–46 on the subject line.
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change to List
and Trade the Shares of the VanEck
Vectors Long/Flat Commodity ETF
Paper Comments
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• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2016–46. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–NYSE–
2016–46 and should be submitted on or
before July 21, 2016.
June 24, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 10,
2016, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade the shares of the VanEck Vectors
Long/Flat Commodity ETF (the
‘‘Fund’’), a series of VanEck Vectors ETF
Trust (‘‘Trust’’), under Nasdaq Rule
5735 (‘‘Managed Fund Shares’’). The
shares of the Fund are collectively
referred to herein as the ‘‘Shares.’’
The text of the proposed rule change
is available at https://
nasdaq.cchwallstreet.com/, at Nasdaq’s
principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
1 15
16 17
CFR 200.30–3(a)(12).
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CFR 240.19b–4.
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forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade the Shares of the Fund under
Nasdaq Rule 5735, which governs the
listing and trading of Managed Fund
Shares 3 on the Exchange.4 The Fund
will be an actively managed exchangetraded fund (‘‘ETF’’). The Shares will be
offered by the Trust, which was
organized as a Delaware statutory trust
on March 15, 2001.5 The Trust is
registered with the Commission as an
investment company and has filed a
registration statement on Form N–1A
(‘‘Registration Statement’’) with the
Commission.6 The Fund is a series of
the Trust.
Van Eck Absolute Return Advisers
Corporation will be the investment
adviser (‘‘Adviser’’) and the
3 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a–1) (the ‘‘1940 Act’’) organized
as an open-end investment company or similar
entity that invests in a portfolio of securities
selected by its investment adviser consistent with
its investment objectives and policies. In contrast,
an open-end investment company that issues Index
Fund Shares, listed and traded on the Exchange
under Nasdaq Rule 5705, seeks to provide
investment results that correspond generally to the
price and yield performance of a specific foreign or
domestic stock index, fixed income securities index
or combination thereof.
4 The Commission approved Nasdaq Rule 5735 in
Securities Exchange Act Release No. 57962 (June
13, 2008), 73 FR 35175 (June 20, 2008) (SR–
NASDAQ–2008–039). The Fund would not be the
first actively-managed fund listed on the Exchange;
see Securities Exchange Act Release No. 66489
(February 29, 2012), 77 FR 13379 (March 6, 2012)
(SR–NASDAQ–2012–004) (order approving listing
and trading of WisdomTree Emerging Markets
Corporate Bond Fund). The Exchange believes the
proposed rule change raises no significant issues
not previously addressed in those prior
Commission orders.
5 The Commission has issued an order granting
certain exemptive relief to the Trust under the 1940
Act (the ‘‘Exemptive Order’’). See Investment
Company Act Release No. 29571 (January 24, 2011)
(File No. 812–13601). In compliance with Nasdaq
Rule 5735(b)(5), which applies to Managed Fund
Shares based on an international or global portfolio,
the Trust’s application for exemptive relief under
the 1940 Act states that the Fund will comply with
the federal securities laws in accepting securities
for deposits and satisfying redemptions with
redemption securities, including that the securities
accepted for deposits and the securities used to
satisfy redemption requests are sold in transactions
that would be exempt from registration under the
Securities Act of 1933 (15 U.S.C. 77a).
6 See Registration Statement on Form N–1A for
the Trust, dated November 12, 2015 (File Nos. 333–
123257 and 811–10325). The descriptions of the
Fund and the Shares contained herein are based, in
part, on information in the Registration Statement.
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administrator to the Fund. Van Eck
Securities Corporation (‘‘Distributor’’)
will be the distributor of the Fund’s
Shares. The Bank of New York Mellon
(‘‘Custodian’’) will act as the custodian
of the Fund’s assets and provide transfer
agency and fund accounting services to
the Fund.
Paragraph (g) of Rule 5735 provides
that if the investment adviser to the
investment company issuing Managed
Fund Shares is affiliated with a brokerdealer, such investment adviser shall
erect a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio.7 In addition,
paragraph (g) further requires that
personnel who make decisions on the
open-end fund’s portfolio composition
must be subject to procedures designed
to prevent the use and dissemination of
material, non-public information
regarding the open-end fund’s portfolio.
Rule 5735(g) is similar to Nasdaq Rule
5705(b)(5)(A)(i); however, paragraph (g)
operates in connection with the
establishment of a ‘‘fire wall’’ between
the investment adviser and the brokerdealer reflects the applicable open-end
fund’s portfolio, not an underlying
benchmark index, as is the case with
index-based funds.
The Adviser is not a broker-dealer,
although it is affiliated with the
Distributor, a broker-dealer. The Adviser
has implemented a fire wall with
respect to its broker-dealer affiliate
regarding access to information
concerning the composition and/or
changes to the Fund’s (including the
Subsidiary’s) portfolio.
7 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, the Adviser and its related personnel are
subject to the provisions of Rule 204A–1 under the
Advisers Act relating to codes of ethics. This Rule
requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with
other applicable securities laws. Accordingly,
procedures designed to prevent the communication
and misuse of non-public information by an
investment adviser must be consistent with Rule
204A–1 under the Advisers Act. In addition, Rule
206(4)–7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment
advice to clients unless such investment adviser has
(i) adopted and implemented written policies and
procedures reasonably designed to prevent
violation, by the investment adviser and its
supervised persons, of the Advisers Act and the
Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review
regarding the adequacy of the policies and
procedures established pursuant to subparagraph (i)
above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
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In the event (a) the Adviser becomes
newly affiliated with a broker-dealer or
registers as a broker-dealer, or (b) any
new adviser or sub-adviser to the Fund
is a registered broker-dealer or becomes
affiliated with a broker-dealer, it will
implement a fire wall with respect to its
relevant personnel and/or such brokerdealer affiliate, if applicable, regarding
access to information concerning the
composition and/or changes to the
portfolio and will be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding such
portfolio. The Fund does not currently
intend to use a sub-adviser.
VanEck Vectors Long/Flat Commodity
ETF
The Fund’s investment objective will
be to seek long-term capital appreciation
while seeking to manage volatility and
reduce downside risk during sustained
market declines.
Principal Investment Strategies
The Fund will be an actively managed
ETF that seeks to achieve its investment
objective by investing, under normal
circumstances, in exchange-traded
commodity futures contracts and, under
certain limited circumstances, other
commodity-linked instruments (‘‘Other
Commodity Instruments’’ 8 and,
collectively with exchange-traded
commodity futures contracts,
‘‘Commodities Instruments’’).
The Fund will invest in Commodities
Instruments primarily through a whollyowned subsidiary of the Fund organized
under the laws of the Cayman Islands
(‘‘Subsidiary’’). The Subsidiary will be
advised by the Adviser.
With respect to the exchange-traded
commodity futures contracts and
options on futures contracts (if
applicable) held, not more than 10% of
the weight 9 of such futures contracts
and options on futures contracts in the
aggregate shall consist of instruments
whose principal trading market is not a
member of the Intermarket Surveillance
Group (‘‘ISG’’) or is a market with which
the Exchange does not have a
comprehensive surveillance sharing
agreement.
The Fund (directly or indirectly
through the Subsidiary) will normally
8 Other
Commodity Instruments will include
commodity-based swap agreements cleared through
a central clearing house or the clearing house’s
affiliate (‘‘Cleared Swaps’’), forward contracts on
commodities, exchange-traded options on futures
contracts, and commodity-based swaps other than
Cleared Swaps.
9 To be calculated as the value of the contract
divided by the total absolute notional value of the
Fund’s futures contracts and options on futures
contracts.
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42769
invest in exchange-traded commodity
futures contracts that are components of
the Morningstar® Long/Flat Commodity
IndexSM (‘‘Benchmark’’), an index
composed of futures contracts on 20
heavily traded commodities across the
energy, agriculture, industrial metals,
precious metals, and livestock sectors.
The Adviser will employ a rules-based
investment approach when selecting
Commodities Instruments based upon
momentum characteristics of the
Commodities Instruments. Commodities
Instruments are assessed on a monthly
basis by comparing current prices to 12month moving averages. The Fund’s
positions will be either long 10 or flat.11
The Fund intends to take long positions
in those Commodities Instruments
whose prices are above their 12-month
moving average. Conversely, the Fund
intends to take flat positions to manage
volatility and reduce downside risk for
those Commodities Instruments whose
prices are below their 12-month moving
average. The Fund will not be an ‘‘index
tracking’’ ETF and may not always
invest in all of the Benchmark’s
components, or in the same proportion,
and it may invest in Commodities
Instruments outside the Benchmark.
The Subsidiary will be an exempted
company operating under Cayman
Islands law. It will be wholly-owned
and controlled by the Fund and will be
advised by the Adviser. The Fund’s
investment in the Subsidiary may not
exceed 25% of the value of the Fund’s
total assets at each quarter-end of the
Fund’s fiscal year. The Fund’s
investment in the Subsidiary is
expected to provide the Fund with
exposure to Commodities Instruments
within the limits of the federal tax laws,
which limit the ability of investment
companies like the Fund to invest
directly in such instruments. The
Subsidiary will have the same
investment objective as the Fund and
will follow the same general investment
policies and restrictions, except that
unlike the Fund, it may invest without
limit in Commodities Instruments.
The Fund (and the Subsidiary, as
applicable) expects to invest its
remaining assets in any one or more of
the following: U.S. government
securities,12 money market funds, cash
10 A ‘‘long’’ position is a position that will
increase in market price if the price of the
commodity futures contract is rising during the
period when the position is open.
11 A ‘‘flat’’ position is a position that will not
increase or decrease in market price whether the
price of the commodity futures contract to which
it relates is rising or falling.
12 Such securities will include securities that are
issued or guaranteed by the U.S. Treasury, by
various agencies of the U.S. government, or by
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and other cash equivalents,13 treasury
inflation-protected securities, sovereign
debt obligations of non-U.S. countries
and repurchase agreements that provide
liquidity, serve as margin or
collateralize the Fund’s or the
Subsidiary’s investments in exchangetraded commodity futures contracts.
The Fund also may invest directly in
ETFs, exchange-traded closed end funds
(to the extent permitted by the 1940 Act,
and certain exemptive relief therefrom),
and exchange-traded notes (‘‘ETNs’’)
that provide exposure to commodities.14
As previously noted, the Subsidiary
will be advised by the Adviser.15 The
Subsidiary will typically consider
investing in futures contracts of the
Benchmark (‘‘Index Commodity
Contracts’’) set forth in the following
table. The table also provides each
instrument’s trading hours, exchange
(‘‘Futures Exchange’’) and ticker
symbol. The table is subject to change.
Contract
ticker
(Bloomberg
generic)
Exchange
code
(Bloomberg) 16
Exchange name 17
Commodity contract
BO1 ................
C 1 .................
CO1 ................
CL1 ................
CT1 ................
GC1 ................
HG1 ................
HO1 ................
KC1 ................
LC1 ................
QS1 ................
LH1 ................
NG1 ................
XB1 ................
S 1 .................
SB1 ................
SI1 ..................
SM1 ................
W 1 ................
CC1 ................
CBT ................
CBT ................
ICE .................
NYM ...............
NYB ...............
CMX ...............
CMX ...............
NYM ...............
NYB ...............
CME ...............
ICE .................
CME ...............
NYM ...............
NYM ...............
CBT ................
NYB ...............
CMX ...............
CBT ................
CBT ................
NYB ...............
Chicago Board of Trade .................................
Chicago Board of Trade .................................
ICE Futures Europe Commodities .................
New York Mercantile Exchange .....................
ICE Futures US Softs ....................................
Commodity Exchange, Inc .............................
Commodity Exchange, Inc .............................
New York Mercantile Exchange .....................
ICE Futures US Softs ....................................
Chicago Mercantile Exchange .......................
ICE Futures Europe Commodities .................
Chicago Mercantile Exchange .......................
New York Mercantile Exchange .....................
New York Mercantile Exchange .....................
Chicago Board of Trade .................................
ICE Futures US Softs ....................................
Commodity Exchange, Inc .............................
Chicago Board of Trade .................................
Chicago Board of Trade .................................
ICE Futures US Softs ....................................
Soybean Oil/Crude .........................................
Corn/No. 2 Yellow ..........................................
Crude Oil Brent/Global Spot ..........................
Crude Oil WTI/Global Spot ............................
Cotton/11⁄16″ ...................................................
Gold ................................................................
Copper High Grade/Scrap No. 2 Wire ...........
Heating Oil #2/Fuel Oil ...................................
Coffee ‘C’/Colombian .....................................
Cattle Live/Choice Average ...........................
Gas-Oil-Petroleum ..........................................
Hogs Lean/Average Iowa/S Minn ..................
Natural Gas Henry Hub .................................
Gasoline Blendstock ......................................
Soybeans/No. 2 Yellow ..................................
Sugar #11/World Raw ....................................
Silver ..............................................................
Soybean Meal/48% Protein ...........................
Wheat/No. 2 Soft Red ....................................
Cocoa/Ivory Coast ..........................................
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As U.S. and London exchanges list
additional contracts, as currently listed
contracts on those exchanges gain
sufficient liquidity or as other
exchanges list sufficiently liquid
contracts, the Adviser may include
those contracts in the list of possible
investments of the Subsidiary. The list
of commodities futures and
commodities markets considered for
investment may change over time.
Other Investments
various instrumentalities, which have been
established or sponsored by the U.S. government.
U.S. Treasury obligations are backed by the ‘‘full
faith and credit’’ of the U.S. government. Securities
issued or guaranteed by federal agencies and U.S.
government-sponsored instrumentalities may or
may not be backed by the full faith and credit of
the U.S. government.
13 Cash equivalents will include banker’s
acceptances, commercial paper, and certificates of
deposit.
14 An ETF is an investment company registered
under the 1940 Act that holds a portfolio of
securities. Many ETFs are designed to track the
performance of a securities index, including
industry, sector, country and region indexes. ETFs
in which the Fund invests will be listed and traded
in the U.S. on registered exchanges. The ETFs in
which the Fund will invest include Index Fund
Shares (as described in Nasdaq Rule 5705), Portfolio
Depositary Receipts (as described in Nasdaq Rule
5705), and Managed Fund Shares (as described in
Nasdaq Rule 5735). The shares of ETFs in which the
Fund may invest will be limited to securities that
trade in markets that are members of the ISG, which
includes all U.S. national securities exchanges, or
exchanges that are parties to a comprehensive
surveillance sharing agreement with the Exchange.
An ETN is a senior, unsecured, unsubordinated
debt security issued by an underwriting bank that,
similar to other debt securities, has a maturity date
and is backed only by the credit of the issuer. ETNs
in which the Fund invests will be listed and traded
in the U.S. on registered exchanges. The ETNs in
which the Fund will invest include Securities
Linked to the Performance of Indexes and
Commodities, Including Currencies (as described in
Nasdaq Rule 5710), and Index-Linked Exchangeable
Notes (as described in Nasdaq Rule 5711). The
Fund will not hold inverse, leveraged, and inverse
leveraged ETFs or ETNs. Leveraged instruments are
operated in a manner designed to seek a multiple
of the performance of an underlying reference
index, and inverse instruments are designed to seek
investment results that correspond to the inverse
(opposite) of the performance of a specified
domestic equity, international or global equity, or
fixed income index or a combination thereof.
15 The Subsidiary will not be registered under the
1940 Act and will not be directly subject to its
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The Fund currently intends to invest
first in exchange-traded commodity
futures contracts. Thereafter, if the Fund
reaches the position limits applicable to
one or more Index Commodity Contracts
or a Futures Exchange imposes
limitations on the Fund’s ability to
maintain or increase its positions in an
exchange-traded commodity futures
contract after reaching accountability
levels or a price limit is in effect on an
exchange-traded commodity futures
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Trading hours
(ET)
20:00–14:20
20:00–14:20
20:00–18:00
18:00–17:15
21:00–14:20
18:00–17:15
18:00–17:15
18:00–17:15
04:15–13:30
09:00–17:00
20:00–18:00
09:00–17:00
18:00–17:15
18:00–17:15
20:00–14:20
03:30–13:00
18:00–17:15
20:00–14:20
20:00–14:20
04:45–13:30
contract during the last 30 minutes of its
regular trading session, the Fund’s
intention is to invest first in Cleared
Swaps to the extent permitted under the
position limits applicable to Cleared
Swaps and appropriate in light of the
liquidity in the Cleared Swaps market,
and then, using its commercially
reasonable judgment, in Other
Commodity Instruments.
investor protections, except as noted in the
Registration Statement. However, the Subsidiary
will be wholly-owned and controlled by the Fund
and will be advised by the Adviser. The Trust’s
board (‘‘Board’’) will have oversight responsibility
for the investment activities of the Fund, including
its investment in the Subsidiary, and the Fund’s
role as the sole shareholder of the Subsidiary. The
Adviser will receive certain fees for managing the
Subsidiary’s assets and the Adviser will waive or
credit such amounts against the fees payable to the
Adviser by the Fund. It is expected that the
Subsidiary will become party to the existing
custody agreement, transfer agency agreement and
accounting agreement of the Trust and Fund.
16 The exchange codes listed are Bloomberg
shorthand codes for the corresponding exchanges.
The New York Board of Trade is currently owned
by the ICE Futures Exchange; Bloomberg continues
to use NYB as its shorthand code for certain
contracts formerly traded on the New York Board
of Trade.
17 All of the exchanges are ISG members.
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The Fund may also invest in
commodity-related foreign and domestic
equity securities.18
Commodities Regulation
The Commodity Futures Trading
Commission (‘‘CFTC’’) has recently
adopted substantial amendments to
CFTC Rule 4.5 relating to the
permissible exemptions and conditions
for reliance on exemptions from
registration as a commodity pool
operator.19 As a result of the
amendments and based on the Fund’s
and its Subsidiary’s current investment
strategies, the Fund and the Subsidiary
will each be a ‘‘commodity pool’’ and
the Adviser, which is currently
registered with the CFTC as a
commodity pool operator (‘‘CPO’’) and a
commodity trading adviser under the
Commodity Exchange Act of 1936, is
considered a CPO with respect to the
Fund and the Subsidiary. The Adviser
is also a member of the National Futures
Association (‘‘NFA’’). The Fund will be
and the Adviser is subject to regulation
by the CFTC and the Commission and
additional disclosure, reporting and
recordkeeping rules imposed upon
commodity pools.
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Investment Restrictions of the Fund 20
The Fund may not make loans, except
that it may (i) lend portfolio securities,
(ii) enter into repurchase agreements,
(iii) purchase all or a portion of an issue
of debt securities, bank loan or
participation interests, bank certificates
of deposit, bankers’ acceptances,
debentures or other securities, whether
or not the purchase is made upon the
original issuance of the securities, and
(iv) participate in an interfund lending
program with other registered
investment companies, all in
accordance with the 1940 Act.
The Fund may not borrow money,
except as permitted under the 1940 Act,
and as interpreted or modified by
regulation from time to time. The Fund
also may not issue senior securities,
except as permitted under the 1940 Act,
and as interpreted or modified by
regulation from time to time.
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid assets (calculated at the time of
18 Commodity-related foreign and domestic
equity securities will be comprised of exchangetraded common stocks of companies that operate in
commodities, natural resources and energy
businesses, and in associated businesses, as well as
companies that provide services or have exposure
to such businesses.
19 17 CFR 4.5. See, e.g., 77 FR 11252 (Feb. 24,
2014); 77 FR 17328 (March 26, 2012).
20 Percentage limitations of the investment
restrictions set forth herein are measured at the time
of investment.
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investment).21 The Fund will monitor
its portfolio liquidity on an ongoing
basis to determine whether, in light of
current circumstances, an adequate
level of liquidity is being maintained,
and will consider taking appropriate
steps in order to maintain adequate
liquidity if, through a change in values,
net assets, or other circumstances, more
than 15% of the Fund’s net assets are
held in illiquid assets. Illiquid assets
include securities subject to contractual
or other restrictions on resale and other
instruments that lack readily available
markets as determined in accordance
with Commission staff guidance.22 An
illiquid security is generally considered
to be a security that cannot be sold or
disposed of in the ordinary course of
business within seven days at or near its
carrying value.
The Fund may not purchase any
security if, as a result of that purchase,
25% or more of its total assets would be
invested in securities of issuers having
their principal business activities in the
same industry. This limit does not apply
to securities issued or guaranteed by the
U.S. Government, its agencies or
instrumentalities, or securities of other
investment companies.
Determination of Net Asset Value
The net asset value (‘‘NAV’’) per
Share for the Fund will be computed by
dividing the value of the net assets of
the Fund (i.e., the value of its total
assets less total liabilities) by the total
number of Shares outstanding. Expenses
and fees, including the management fee,
will be accrued daily and taken into
21 In reaching liquidity decisions, the Adviser
may consider factors such as but not limited to the
following: The frequency of trades and quotes for
the security; the number of dealers wishing to
purchase or sell the security and the number of
other potential purchasers; dealer undertakings to
make a market in the security; and the nature of the
security and the nature of the marketplace in which
it trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the
mechanics of transfer).
22 The Commission has stated that long-standing
Commission guidelines have required open-end
funds to hold no more than 15% of their net assets
in illiquid securities and other illiquid assets. See
Investment Company Act Release No. 28193 (March
11, 2008), 73 FR 14618 (March 18, 2008), footnote
34. See also Investment Company Act Release No.
5847 (October 21, 1969), 35 FR 19989 (December
31, 1970) (Statement Regarding ‘‘Restricted
Securities’’); Investment Company Act Release No.
18612 (March 12, 1992), 57 FR 9828 (March 20,
1992) (Revisions of Guidelines to Form N–1A). A
fund’s portfolio security is illiquid if it cannot be
disposed of in the ordinary course of business
within seven days at approximately the value
ascribed to it by the fund. See Investment Company
Act Release No. 14983 (March 12, 1986), 51 FR
9773 (March 21, 1986) (adopting amendments to
Rule 2a–7 under the 1940 Act); Investment
Company Act Release No. 17452 (April 23, 1990),
55 FR 17933 (April 30, 1990) (adopting Rule 144A
under the Securities Act of 1933).
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42771
account for purposes of determining
NAV. The NAV of the Fund will be
determined each business day as of the
close of trading (ordinarily 4:00 p.m.
Eastern Time) on the Nasdaq. Any assets
or liabilities denominated in currencies
other than the U.S. dollar will be
converted into U.S. dollars at the
current market rates on the date of
valuation as quoted by one or more
sources.
The values of the Fund’s portfolio
securities will be valued in accordance
with the Trust’s valuation policies and
procedures which may be amended
from time to time. Included herein is a
description of how various types of
securities and instruments will be
valued based on the current valuation
policies and procedures for the Trust.
ETFs, exchange-traded closed-end
funds, ETNs, and commodity-related
foreign and domestic equity securities,
will be based on the securities’ closing
prices on local markets, when available.
Due to the time differences between the
United States and certain countries,
securities on these non-U.S. exchanges
may not trade at times when Shares of
the Fund will trade. In the absence of a
last reported sales price, or if no sales
were reported, and for other assets for
which market quotes are not readily
available, values may be based on
quotes obtained from a quotation
reporting system, established market
makers or by an outside independent
pricing service using data reflecting the
earlier closing of the principal markets
for those securities. U.S. government
securities, treasury inflation-protected
securities and sovereign debt obligations
of non-U.S. countries will normally be
valued on the basis of quotes from
brokers or dealers, established market
makers or an outside independent
pricing service. Short-term investments
purchased with a remaining maturity of
60 days or less, including repurchase
agreements and cash equivalents, will
be valued on the basis of quotes from
broker dealers, established major market
makers, an independent pricing service
or at amortized cost. Money market
funds will be valued at their reported
closing NAV. Futures contracts and
options on futures contracts, which are
traded on exchanges, will be valued at
the current settle price for like contracts
acquired on the day on which the
futures contract will be valued as of the
close of such exchanges.
Other Commodity Instruments not
traded on exchanges will generally be
valued daily based upon quotations
from market makers or by a pricing
service and in accordance with the
Trust’s valuation policies and
procedures. Prices obtained by an
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outside independent pricing service
may use information provided by
market makers or estimates of market
values obtained from yield data related
to investments or securities with similar
characteristics and may use a
computerized grid matrix of securities
and its evaluations in determining what
it believes is the fair value of the
portfolio securities. If a market
quotation for a security is not readily
available or the Adviser believes it does
not otherwise accurately reflect the
market value of the security at the time
the Fund calculates its NAV, the
security will be fair valued by the
Adviser in accordance with the Trust’s
valuation policies and procedures
approved by the Board of Trustees.
The Fund may also use fair value
pricing in a variety of circumstances,
including but not limited to, situations
when the value of a security or
instrument in the Fund’s portfolio has
been materially affected by events
occurring after the close of the market
on which the security or instrument is
principally traded (such as a corporate
action or other news that may materially
affect the price of a security) or trading
in a security or instrument has been
suspended or halted.
In addition, the Fund expects that it
will fair value certain of the foreign
equity securities held by the Fund each
day it calculates its NAV, except those
securities principally traded on
exchanges that close at the same time
the Fund calculates its NAV.
Accordingly, the Fund’s NAV may
reflect certain portfolio securities’ or
instruments’ fair values rather than their
market prices at the time the exchanges
on which they principally trade close.
Fair value pricing involves subjective
judgments and it is possible that a fair
value determination for a security or
instrument will be materially different
than the value that could be realized
upon the sale of the security or
instrument. With respect to securities or
instruments that are principally traded
on foreign exchanges, the value of the
Fund’s portfolio securities or
instruments may change on days when
you will not be able to purchase or sell
your Shares.
mstockstill on DSK3G9T082PROD with NOTICES
Creation and Redemption of Shares
The Trust will issue and sell Shares
of the Fund only to authorized
participants (‘‘Authorized Participants’’)
and only in aggregations of 50,000
Shares (each, a ‘‘Creation Unit’’), on a
continuous basis through the
Distributor, without an initial sales load,
at their NAV next determined after
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20:01 Jun 29, 2016
Jkt 238001
receipt, on any Business Day,23 of an
order in proper form.
The consideration for a purchase of
Creation Units will generally consist of
cash and/or the in-kind deposit of a
designated portfolio of securities
(‘‘Deposit Securities’’) and an amount of
cash computed as described below
(‘‘Cash Component’’). The Cash
Component together with the Deposit
Securities, as applicable, will be
referred to as the ‘‘Fund Deposit,’’
which represents the minimum initial
and subsequent investment amount for
Shares. The Cash Component will
represent the difference between the
NAV of a Creation Unit and the market
value of Deposit Securities and may
include a Dividend Equivalent Payment.
The ‘‘Dividend Equivalent Payment’’
will enable the Fund to make a
complete distribution of dividends on
the next dividend payment date, and
will be an amount equal, on a per
Creation Unit basis, to the dividends on
all the securities held by the Fund
(‘‘Fund Securities’’) with ex-dividend
dates within the accumulation period
for such distribution (the
‘‘Accumulation Period’’), net of
expenses and liabilities for such period,
as if all of the Fund Securities had been
held by the Trust for the entire
Accumulation Period. The
Accumulation Period will begin on the
ex-dividend date for the Fund and will
end on the next ex-dividend date.
The Administrator, through the
NSCC, will make available on each
Business Day, immediately prior to the
opening of business on the Exchange
(currently 9:30 a.m. Eastern Time), the
list of the names and the required
number of shares of each Deposit
Security to be included in the current
Fund Deposit (based on information at
the end of the previous Business Day) as
well as the Cash Component for the
Fund. Such Fund Deposit will be
applicable, subject to any adjustments
as described below, in order to effect
creations of Creation Units of the Fund
until such time as the next-announced
Fund Deposit composition is made
available.
The identity and number of shares of
the Deposit Securities required for the
Fund Deposit for the Fund may change
as rebalancing adjustments and
corporate action events occur from time
to time. In addition, the Trust will
23 A ‘‘Business Day’’ with respect to the Fund is
any day on which Nasdaq is open for business. As
of the date of this filing, the Nasdaq observes the
following holidays: New Year’s Day, Martin Luther
King, Jr. Day, President’s Day (Washington’s
Birthday), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
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reserve the right to accept a basket of
securities or cash that differs from
Deposit Securities or to permit or
require the substitution of an amount of
cash (i.e., a ‘‘cash in lieu’’ amount) to be
added to the Cash Component to replace
any Deposit Security which may, among
other reasons, not be available in
sufficient quantity for delivery or not be
permitted to be re-registered in the
name of the Trust as a result of an inkind creation order pursuant to local
law or market convention or which may
not be eligible for transfer through the
Clearing Process, or which may not be
eligible for trading by a Participating
Party (defined below).
In light of the foregoing, in order to
seek to replicate the in-kind creation
order process, the Trust expects to
purchase the Deposit Securities
represented by the cash in lieu amount
in the secondary market (‘‘Market
Purchases’’). In such cases where the
Trust makes Market Purchases because
a Deposit Security may not be permitted
to be re-registered in the name of the
Trust as a result of an in-kind creation
order pursuant to local law or market
convention, or for other reasons, the
Authorized Participant will reimburse
the Trust for, among other things, any
difference between the market value at
which the securities were purchased by
the Trust and the cash in lieu amount
(which amount, at the Adviser’s
discretion, may be capped), applicable
registration fees and taxes.
Brokerage commissions incurred in
connection with the Trust’s acquisition
of Deposit Securities will be at the
expense of the Fund and will affect the
value of all Shares of the Fund; but the
Adviser may adjust the transaction fee
to the extent the composition of the
Deposit Securities changes or cash in
lieu is added to the Cash Component to
protect ongoing shareholders. The
adjustments described above will reflect
changes, known to the Adviser on the
date of announcement to be in effect by
the time of delivery of the Fund Deposit,
resulting from stock splits and other
corporate actions.
In addition to the list of names and
numbers of securities constituting the
current Deposit Securities of the Fund
Deposit, the Administrator, through the
NSCC, will also make available (i) on
each Business Day, the Dividend
Equivalent Payment, if any, and the
estimated Cash Component effective
through and including the previous
Business Day, per outstanding Shares of
the Fund, and (ii) on a continuous basis
throughout the day, the Indicative
Optimized Portfolio Value (‘‘IOPV’’).
To be eligible to place orders with the
Distributor to create and redeem
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Creation Units of the Fund, an
Authorized Participant must be (1) a
‘‘Participating Party,’’ i.e., a brokerdealer or other participant in the
Clearing Process through the
Continuous Net Settlement System of
the NSCC; or (2) a DTC Participant; and,
in either case, must have executed an
agreement with the Distributor and the
Transfer Agent (as it may be amended
from time to time in accordance with its
terms) with respect to the purchases and
redemptions of Creation Units. All
Creation Units of the Fund, however
created, will be entered on the records
of the Depository in the name of Cede
& Co. for the account of a DTC
Participant.
All orders to create Creation Units
must be received by the Distributor no
later than the closing time of the regular
trading session on Nasdaq (‘‘Closing
Time’’) (ordinarily 4:00 p.m., Eastern
Time) on the date such order is placed
in order for creation of Creation Units to
be effected based on the NAV of the
Fund as determined on such date.
Shares may be redeemed only in
Creation Units at their NAV next
determined after receipt of a redemption
request in proper form by the
Distributor, only on a Business Day and
only through a Participating Party or
DTC Participant who has executed a
Participant Agreement. In order to
redeem Creation Units, an Authorized
Participant must submit an order to
redeem for one or more Creation Units.
All such orders must be received by the
Distributor in proper form no later than
Closing Time in order to receive the
day’s closing NAV per share.
To the extent the Fund’s redemptions
are effected in-kind, the Administrator,
through NSCC, makes available
immediately prior to the opening of
business on the Exchange (currently,
9:30 a.m., Eastern Time) on each day
that the Nasdaq is open for business, the
Fund Securities that will be applicable
(subject to possible amendment or
correction) to redemption requests
received in proper form (as defined
below) on that day.
Unless cash redemptions are
permitted or required for the Fund, the
redemption proceeds for a Creation Unit
generally consist of Fund Securities as
announced by the Administrator on the
Business Day of the request for
redemption, plus cash in an amount
equal to the difference between the NAV
of the Shares being redeemed, as next
determined after a receipt of a request
in proper form, and the value of the
Fund Securities, less the redemption
transaction fee and applicable variable
fees. Should the Fund Securities have a
value greater than the NAV of the
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20:01 Jun 29, 2016
Jkt 238001
Shares being redeemed, a compensating
cash payment to the Trust equal to the
differential plus the applicable
redemption transaction fee will be
required to be arranged for by or on
behalf of the redeeming shareholder.
The Fund reserves the right to honor a
redemption request by delivering a
basket of securities or cash that differs
from the Fund Securities.
Availability of Information
The Fund’s Web site
(www.vaneck.com), which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Fund that may
be downloaded. The Fund’s Web site
will include additional quantitative
information updated on a daily basis,
including, for the Fund: (1) The prior
business day’s reported NAV and
closing price, and a calculation of the
premium and discount of the closing
price against the NAV; and (2) data in
chart format displaying the frequency
distribution of discounts and premiums
of the daily closing price against the
NAV, within appropriate ranges, for
each of the four previous calendar
quarters. On each business day, before
commencement of trading in Shares in
the Regular Market Session on the
Exchange, the Fund will disclose on its
Web site the Disclosed Portfolio as
defined in Nasdaq Rule 5735(c)(2) that
will form the basis for the Fund’s
calculation of NAV at the end of the
business day.24
On a daily basis, the Fund will
disclose on the Fund’s Web site the
following information regarding each
portfolio holding, as applicable to the
type of holding: Ticker symbol, CUSIP
number or other identifier, if any; a
description of the holding (including
the type of holding), the identity of the
security or other asset or instrument
underlying the holding, if any; for
options, the option strike price; quantity
held (as measured by, for example, par
value, notional value or number of
shares, contracts or units); maturity
date, if any; coupon rate, if any;
effective date, if any; market value of the
holding; and percentage weighting of
the holding in the Fund’s portfolio. The
Web site information will be publicly
available at no charge.
In addition, a basket composition file,
which includes the security names and
24 Under accounting procedures to be followed by
the Fund, trades made on the prior business day
(‘‘T’’) will be booked and reflected in NAV on the
current business day (‘‘T+1’’). Accordingly, the
Fund will be able to disclose at the beginning of the
business day the portfolio that will form the basis
for the NAV calculation at the end of the business
day.
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42773
quantities required to be delivered in
exchange for the Fund’s Shares, together
with estimates and actual cash
components, will be publicly
disseminated daily prior to the opening
of the Exchange via NSCC. The basket
represents one Creation Unit of the
Fund.
Also, for the Fund, an IOPV,25 defined
in Rule 5735(c)(3) as the ‘‘Intraday
Indicative Value,’’ that reflects an
estimated intraday value of the Fund’s
portfolio (including the Subsidiary’s
portfolio), will be disseminated.
Moreover, the Intraday Indicative Value,
available on the NASDAQ OMX
Information LLC proprietary index data
service 26 will be based upon the current
value for the components of the
Disclosed Portfolio and will be updated
and widely disseminated by one or
more major market data vendors and
broadly displayed at least every 15
seconds during the Regular Market
Session.
The dissemination of the Intraday
Indicative Value, together with the
Disclosed Portfolio, will allow investors
to determine the value of the underlying
portfolio of the Fund on a daily basis
and will provide a close estimate of that
value throughout the trading day.
Intra-day, executable price quotations
on the exchange-traded assets held by
the Fund and the Subsidiary, including
futures contracts, options on futures
contracts, ETFs, ETNs, closed-end funds
and foreign and domestic equity
securities are expected to be available
on the exchange on which they are
traded. Intra-day, executable price
quotations on swaps, money market
funds, forward contracts, U.S.
government securities, cash and other
cash equivalents, treasury inflation25 The IOPV will be based on the current value
of the securities and other assets held by the Fund
and the Subsidiary using market data converted
into U.S. dollars at the current currency rates. The
IOPV price will be based on quotes and closing
prices from the securities’ local market and may not
reflect events that occur subsequent to the local
market’s close. Premiums and discounts between
the IOPV and the market price may occur. The
IOPV will not necessarily reflect the precise
composition of the current portfolio of securities
and assets held by a Fund at a particular point in
time or the best possible valuation of the current
portfolio. Therefore, the IOPV should not be viewed
as a ‘‘real-time’’ update of a Fund’s NAV, which
will be calculated only once a day. The quotations
of certain Fund holdings may not be updated
during U.S. trading hours if such holdings do not
trade in the United States.
26 Currently, the NASDAQ OMX Global Index
Data Service (‘‘GIDS’’) is the NASDAQ OMX global
index data feed service, offering real-time updates,
daily summary messages, and access to widely
followed indexes and Intraday Indicative Values for
ETFs. GIDS provides investment professionals with
the daily information needed to track or trade
NASDAQ OMX indexes, listed ETFs, or third-party
partner indexes and ETFs.
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Federal Register / Vol. 81, No. 126 / Thursday, June 30, 2016 / Notices
protected securities, sovereign debt
obligations of non-U.S. countries and
repurchase agreements will be available
from major broker-dealer firms. Intraday price information will also be
available through subscription services,
such as Bloomberg and Reuters.
Additionally, the Trade Reporting and
Compliance Engine (‘‘TRACE’’) of the
Financial Industry Regulatory Authority
(‘‘FINRA’’) will be a source of price
information for certain fixed income
securities held by the Fund.
Investors will also be able to obtain
the Fund’s Statement of Additional
Information (‘‘SAI’’), the Fund’s
Shareholder Reports, and its Form N–
CSR and Form N–SAR, filed twice a
year. The Fund’s SAI and Shareholder
Reports will be available free upon
request from the Fund, and those
documents and the Form N–CSR and
Form N–SAR may be viewed on-screen
or downloaded from the Commission’s
Web site at www.sec.gov. Information
regarding market price and volume of
the Shares will be continually available
on a real-time basis throughout the day
on brokers’ computer screens and other
electronic services. The previous day’s
closing price and trading volume
information for the Shares will be
published daily in the financial section
of newspapers. Quotation and last sale
information for the Shares will be
available via Nasdaq proprietary quote
and trade services, as well as in
accordance with the Unlisted Trading
Privileges and the Consolidated Tape
Association plans for the Shares.
Quotation and last sale information for
any underlying exchange-traded equity
will also be available via the quote and
trade service of their respective primary
exchanges, as well as in accordance
with the Unlisted Trading Privileges
and the Consolidated Tape Association
plans. Quotation and last sale
information for any underlying
exchange-traded options will also be
available via the quote and trade service
of their respective primary exchanges.
Quotation and last sale information for
any underlying exchange-traded futures
contracts will be available via the quote
and trade service of their respective
primary exchanges.
Information on the Morningstar Long/
Flat Commodity IndexSM will be
available on the Morningstar Indexes
Web site
(www.indexes.morningstar.com).
Initial and Continued Listing
The Shares will be subject to Rule
5735, which sets forth the initial and
continued listing criteria applicable to
Managed Fund Shares. The Exchange
represents that, for initial and/or
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20:01 Jun 29, 2016
Jkt 238001
continued listing, the Fund and the
Subsidiary must be in compliance with
Rule 10A–3 27 under the Act. A
minimum of 100,000 Shares will be
outstanding at the commencement of
trading on the Exchange. The Exchange
will obtain a representation from the
issuer of the Shares that the NAV per
Share will be calculated daily and that
the NAV and the Disclosed Portfolio
will be made available to all market
participants at the same time.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Fund. Nasdaq will halt trading in
the Shares under the conditions
specified in Nasdaq Rules 4120 and
4121, including the trading pauses
under Nasdaq Rules 4120(a)(11) and
(12). Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the securities and
other assets constituting the Disclosed
Portfolio of the Fund and the
Subsidiary; or (2) whether other unusual
conditions or circumstances detrimental
to the maintenance of a fair and orderly
market are present. Trading in the
Shares also will be subject to Rule
5735(d)(2)(D), which sets forth
circumstances under which Shares of
the Fund may be halted.
Trading Rules
Nasdaq deems the Shares to be equity
securities, thus rendering trading in the
Shares subject to Nasdaq’s existing rules
governing the trading of equity
securities. Nasdaq will allow trading in
the Shares from 4:00 a.m. until 8:00
p.m. Eastern Time. The Exchange has
appropriate rules to facilitate
transactions in the Shares during all
trading sessions. As provided in Nasdaq
Rule 5735(b)(3), the minimum price
variation for quoting and entry of orders
in Managed Fund Shares traded on the
Exchange is $0.01.
applicable federal securities laws.28 The
Exchange represents that these
procedures are adequate to properly
monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules and
applicable federal securities laws.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows, and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading information it can obtain
relating to the Shares, other exchangetraded securities and other assets held
by the Fund and the Subsidiary, which
include exchange-traded commodityrelated equity securities, exchangetraded futures contracts, exchangetraded options on futures contracts,
ETNs, ETFs and exchange-traded
closed-end funds, with other markets
and other entities that are members of
the ISG 29 and FINRA may obtain
trading information regarding trading in
the Shares, and such exchange-traded
securities and other assets held by the
Fund and the Subsidiary from such
markets and other entities. In addition,
the Exchange may obtain information
regarding trading in the Shares, and
such exchange-traded securities and
other assets held by the Fund and the
Subsidiary from markets and other
entities that are members of ISG, which
includes securities and futures
exchanges, or with which the Exchange
has in place a comprehensive
surveillance sharing agreement.
Moreover, FINRA, on behalf of the
Exchange, will be able to access, as
needed, trade information for certain
fixed income securities held by the
Fund reported to FINRA’s TRACE.
In addition, with respect to the
exchange-traded futures contracts and
options on futures contracts held, not
more than 10% of the weight 30 of such
futures contracts and options on futures
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances,
administered by both Nasdaq and also
the Financial Industry Regulatory
Authority (‘‘FINRA’’) on behalf of the
Exchange, which are designed to detect
violations of Exchange rules and
27 See
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28 FINRA surveils trading on the Exchange
pursuant to a regulatory services agreement. The
Exchange is responsible for FINRA’s performance
under this regulatory services agreement.
29 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of the Disclosed Portfolio may trade on
markets that are members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.
30 To be calculated as the value of the contract
divided by the total absolute notional value of the
Fund’s futures contracts.
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contracts in the aggregate shall consist
of instruments whose principal trading
market is not a member of ISG or is a
market with which the Exchange does
not have a comprehensive surveillance
sharing agreement. Not more than 10%
of the equity securities (including shares
of ETFs, closed-end funds, and
commodity-related foreign and domestic
equity securities) and ETNs in which
the Fund may invest will be invested in
securities that trade in markets that are
not members of the ISG or are not
parties to a comprehensive surveillance
sharing agreement with the Exchange. In
addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
Information Circular
Prior to the commencement of
trading, the Exchange will inform its
members in an Information Circular of
the special characteristics and risks
associated with trading the Shares.
Specifically, the Information Circular
will discuss the following: (1) The
procedures for purchases and
redemptions of Shares in Creation Units
(and that Shares are not individually
redeemable); (2) Nasdaq Rule 2111A,
which imposes suitability obligations on
Nasdaq members with respect to
recommending transactions in the
Shares to customers; (3) how and by
whom the information regarding the
Intraday Indicative Value and the
Disclosed Portfolio is disseminated; (4)
the risks involved in trading the Shares
during the Pre-Market and Post-Market
Sessions when an updated Intraday
Indicative Value will not be calculated
or publicly disseminated; (5) the
requirement that members deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (6) trading information.
In addition, the Information Circular
will advise members, prior to the
commencement of trading, of the
prospectus delivery requirements
applicable to the Fund. Members
purchasing Shares from the Fund for
resale to investors will deliver a
prospectus to such investors. The
Information Circular will also discuss
any exemptive, no-action and
interpretive relief granted by the
Commission from any rules under the
Act.
Additionally, the Information Circular
will reference that the Fund is subject
to various fees and expenses. The
Information Circular will also disclose
the trading hours of the Shares of the
Fund and the applicable NAV
calculation time for the Shares. The
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20:01 Jun 29, 2016
Jkt 238001
Information Circular will disclose that
information about the Shares of the
Fund will be publicly available on the
Fund’s Web site.
Continued Listing Representations
All statements and representations
made in this filing regarding (a) the
description of the portfolio, (b)
limitations on portfolio holdings or
reference assets, or (c) the applicability
of Exchange rules and surveillance
procedures shall constitute continued
listing requirements for listing the
Shares on the Exchange. In addition, the
issuer has represented to the Exchange
that it will advise the Exchange of any
failure by the Fund to comply with the
continued listing requirements, and,
pursuant to its obligations under
Section 19(g)(1) of the Act, the Exchange
will monitor for compliance with the
continued listing requirements. If the
Fund is not in compliance with the
applicable listing requirements, the
Exchange will commence delisting
procedures under the Nasdaq 5800
Series.
2. Statutory Basis
Nasdaq believes that the proposal is
consistent with Section 6(b) of the Act
in general and Section 6(b)(5) of the Act
in particular in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and to remove
impediments to and perfect the
mechanism of a free and open market
and in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in Nasdaq Rule 5735. The
Exchange represents that trading in the
Shares will be subject to the existing
trading surveillances, administered by
both Nasdaq and also FINRA on behalf
of the Exchange, which are designed to
detect violations of Exchange rules and
applicable federal securities laws. The
Adviser is affiliated with a broker-dealer
and has implemented a fire wall with
respect to its broker-dealer affiliate
regarding access to information
concerning the composition and/or
changes to the Fund’s portfolio. In
addition, paragraph (g) of Nasdaq Rule
5735 further requires that personnel
who make decisions on the open-end
fund’s portfolio composition must be
subject to procedures designed to
PO 00000
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Sfmt 4703
42775
prevent the use and dissemination of
material, non-public information
regarding the open-end fund’s portfolio.
The Fund’s and the Subsidiary’s
investments will be consistent with the
Fund’s investment objective and
although certain investments will have
a leveraging effect on the Fund, the
Fund will not seek leveraged returns.
FINRA may obtain information via ISG
from other exchanges that are members
of ISG.
In addition, the Exchange may obtain
information regarding trading in the
Shares, other exchange-traded securities
and other assets held by the Fund and
the Subsidiary from markets and other
entities that are members of ISG, which
includes securities and futures
exchanges, or with which the Exchange
has in place a comprehensive
surveillance sharing agreement.
Moreover, FINRA, on behalf of the
Exchange, will be able to access, as
needed, trade information for certain
fixed income securities held by the
Fund reported to FINRA’s TRACE. With
respect to the futures contracts held, not
more than 10% of the weight 31 of such
futures contracts and options on futures
contracts in the aggregate shall consist
of instruments whose principal trading
market is not a member of the ISG or is
a market with which the Exchange does
not have a comprehensive surveillance
sharing agreement. Not more than 10%
of the equity securities (including shares
of ETFs and closed-end funds, and
commodity-related foreign and domestic
equity securities) and ETNs in which
the Fund may invest will be invested in
securities that trade in markets that not
members of the ISG or are not parties to
a comprehensive surveillance sharing
agreement with the Exchange.
The Fund will invest up to 25% of its
total assets in the Subsidiary as
measured at each quarter-end of the
Fund’s fiscal year end. The Fund may
hold up to an aggregate amount of 15%
of its net assets in illiquid securities
(calculated at the time of investment).
The Fund will use the fixed-income
securities as investments and to
collateralize the Fund’s or the
Subsidiary’s commodity exposure on a
day-to-day basis. The Fund may also
invest directly in ETFs and exchangetraded closed-end funds, that provide
exposure to commodities, equity
securities and fixed income securities to
the extent permitted under the 1940
Act.
The proposed rule change is designed
to promote just and equitable principles
31 To be calculated as the value of the contract
divided by the total absolute notional value of the
Fund’s futures contracts.
E:\FR\FM\30JNN1.SGM
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mstockstill on DSK3G9T082PROD with NOTICES
42776
Federal Register / Vol. 81, No. 126 / Thursday, June 30, 2016 / Notices
of trade and to protect investors and the
public interest in that the Exchange will
obtain a representation from the issuer
of the Shares that the NAV per Share
will be calculated daily and that the
NAV and the Disclosed Portfolio will be
made available to all market
participants at the same time.
In addition, a large amount of
information will be publicly available
regarding the Fund and the Shares,
thereby promoting market transparency.
Moreover, the Intraday Indicative Value,
available on the NASDAQ OMX
Information LLC proprietary index data
service will be widely disseminated by
one or more major market data vendors
at least every 15 seconds during the
Regular Market Session. On each
business day, before commencement of
trading in Shares in the Regular Market
Session on the Exchange, the Fund will
disclose on its Web site the Disclosed
Portfolio of the Fund and the Subsidiary
that will form the basis for the Fund’s
calculation of NAV at the end of the
business day.
Information regarding market price
and trading volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services, and quotation and last sale
information for the Shares will be
available via Nasdaq proprietary quote
and trade services, as well as in
accordance with the Unlisted Trading
Privileges and the Consolidated Tape
Association plans for the Shares. Intraday price information will be available
through subscription services, such as
Bloomberg and Reuters.
The Fund’s Web site will include a
form of the prospectus for the Fund and
additional data relating to NAV and
other applicable quantitative
information. Trading in Shares of the
Fund will be halted under the
conditions specified in Nasdaq Rules
4120 and 4121 or because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable, and trading in
the Shares will be subject to Nasdaq
Rule 5735(d)(2)(D), which sets forth
circumstances under which Shares of
the Fund may be halted. In addition, as
noted above, investors will have ready
access to information regarding the
Fund’s holdings, the Intraday Indicative
Value, the Disclosed Portfolio, and
quotation and last sale information for
the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of actively-
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20:01 Jun 29, 2016
Jkt 238001
managed exchange-traded product that
will enhance competition among market
participants, to the benefit of investors
and the marketplace.
As noted above, FINRA, on behalf of
the Exchange, will communicate as
needed regarding trading information it
can obtain relating to the Shares, other
exchange-traded securities and other
assets held by the Fund and the
Subsidiary with other markets and other
entities that are members of the ISG and
FINRA may obtain trading information
regarding trading in the Shares, other
exchange-traded securities and other
assets held by the Fund and the
Subsidiary from such markets and other
entities.
In addition, the Exchange may obtain
information regarding trading in the
Shares, other exchange-traded securities
and other assets held by the Fund and
the Subsidiary from markets and other
entities that are members of ISG, which
includes securities and futures
exchanges, or with which the Exchange
has in place a comprehensive
surveillance sharing agreement.
Additionally, FINRA’s TRACE will be
a source of price information for certain
fixed income securities held by the
Fund. Furthermore, as noted above,
investors will have ready access to
information regarding the Fund’s
holdings, the Intraday Indicative Value,
the Disclosed Portfolio, and quotation
and last sale information for the Shares.
For the above reasons, Nasdaq believes
the proposed rule change is consistent
with the requirements of Section 6(b)(5)
of the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
rule change will facilitate the listing and
trading of an additional type of activelymanaged exchange-traded fund that will
enhance competition among market
participants, to the benefit of investors
and the marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
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Frm 00148
Fmt 4703
Sfmt 4703
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will: (a) By
order approve or disapprove such
proposed rule change; or (b) institute
proceedings to determine whether the
proposed rule change should be
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2016–086 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2016–086. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site https://www.sec.gov/
rules/sro.shtml. Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of Nasdaq. All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
E:\FR\FM\30JNN1.SGM
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Federal Register / Vol. 81, No. 126 / Thursday, June 30, 2016 / Notices
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2016–086 and should be
submitted on or before July 21, 2016.
Paper Statements
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Brent J. Fields,
Secretary.
[FR Doc. 2016–15454 Filed 6–29–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release Nos. 33–10105; 34–78158; File No.
265–27]
SEC Advisory Committee on Small and
Emerging Companies
Securities and Exchange
Commission.
ACTION: Notice of meeting.
AGENCY:
The Securities and Exchange
Commission Advisory Committee on
Small and Emerging Companies is
providing notice that it will hold a
public meeting on Tuesday, July 19,
2016, in Multi-Purpose Room LL–006 at
the Commission’s headquarters, 100 F
Street NE., Washington, DC. The
meeting will begin at 9:30 a.m. (EDT)
and will be open to the public. The
meeting will be webcast on the
Commission’s Web site at www.sec.gov.
Persons needing special
accommodations to take part because of
a disability should notify the contact
person listed below. The public is
invited to submit written statements to
the Committee. The agenda for the
meeting includes matters relating to
rules and regulations affecting small and
emerging companies under the federal
securities laws.
DATES: The public meeting will be held
on Tuesday, July 19, 2016. Written
statements should be received on or
before July 15, 2016.
ADDRESSES: The meeting will be held at
the Commission’s headquarters, 100 F
Street NE., Washington, DC. Written
statements may be submitted by any of
the following methods:
SUMMARY:
mstockstill on DSK3G9T082PROD with NOTICES
Electronic Statements
• Use the Commission’s Internet
submission form (https://www.sec.gov/
info/smallbus/acsec.shtml); or
• Send an email message to rulecomments@sec.gov. Please include File
Number 265–27 on the subject line; or
32 17
20:01 Jun 29, 2016
Dated: June 27, 2016.
Brent J. Fields,
Committee Management Officer.
[FR Doc. 2016–15509 Filed 6–29–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78151; File No. SR–OCC–
2016–003]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change Related to
the Acceptance of Pass-Through
Letters of Credit as a Form of Margin
Asset
June 24, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
• Send paper statements to Brent J.
Fields, Federal Advisory Committee
Management Officer, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File No.
265–27. This file number should be
included on the subject line if email is
used. To help us process and review
your statement more efficiently, please
use only one method. The Commission
will post all statements on the Advisory
Committee’s Web site (https://
www.sec.gov/spotlight/acsecspotlight.shtml).
Statements also will be available for
Web site viewing and printing in the
Commission’s Public Reference Room,
100 F Street NE., Washington, DC
20549, on official business days
between the hours of 10:00 a.m. and
3:00 p.m. All statements received will
be posted without change; we do not
edit personal identifying information
from submissions. You should submit
only information that you wish to make
available publicly.
FOR FURTHER INFORMATION CONTACT: Julie
Z. Davis, Senior Special Counsel, at
(202) 551–3460, Office of Small
Business Policy, Division of Corporation
Finance, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–3628.
SUPPLEMENTARY INFORMATION: In
accordance with Section 10(a) of the
Federal Advisory Committee Act, 5
U.S.C.-App. 1, and the regulations
thereunder, Keith Higgins, Designated
Federal Officer of the Committee, has
ordered publication of this notice.
Jkt 238001
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42777
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 17,
2016, The Options Clearing Corporation
(‘‘OCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
have been prepared by OCC. OCC filed
the proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(4)(ii) thereunder 4 so that
the proposal was effective upon filing
with the Commission. The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change by OCC
would amend OCC Rule 604 to permit
pass-through letters of credit (‘‘PassThrough Letters of Credit’’) as a form of
margin asset to satisfy margin
obligations for futures, futures options,
and commodity options positions
(collectively referred to as ‘‘futures
positions’’) held in segregated futures
accounts and segregated futures
professional accounts (collectively
referred to as ‘‘segregated futures
accounts’’) that are not eligible to hold
positions in security futures.5
Capitalized terms not defined herein
have the same meaning as set forth in
the OCC By-Laws and Rules.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
OCC included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. OCC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(1) Purpose
The purpose of the proposed rule
change is to amend OCC Rule 604 to
permit Pass-Through Letters of Credit as
a form of margin asset to satisfy margin
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(4)(ii).
5 See OCC By-Laws Article I, Section 1.S.(5) and
(6) defining segregated futures accounts and
segregated futures professional accounts.
2 17
E:\FR\FM\30JNN1.SGM
30JNN1
]]>Agencies
[Federal Register Volume 81, Number 126 (Thursday, June 30, 2016)]
[Notices]
[Pages 42768-42777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15454]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78150; File No. SR-NASDAQ-2016-086]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change to List and Trade the Shares
of the VanEck Vectors Long/Flat Commodity ETF
June 24, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 10, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade the shares of the VanEck
Vectors Long/Flat Commodity ETF (the ``Fund''), a series of VanEck
Vectors ETF Trust (``Trust''), under Nasdaq Rule 5735 (``Managed Fund
Shares''). The shares of the Fund are collectively referred to herein
as the ``Shares.''
The text of the proposed rule change is available at https://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Shares of the Fund
under Nasdaq Rule 5735, which governs the listing and trading of
Managed Fund Shares \3\ on the Exchange.\4\ The Fund will be an
actively managed exchange-traded fund (``ETF''). The Shares will be
offered by the Trust, which was organized as a Delaware statutory trust
on March 15, 2001.\5\ The Trust is registered with the Commission as an
investment company and has filed a registration statement on Form N-1A
(``Registration Statement'') with the Commission.\6\ The Fund is a
series of the Trust.
---------------------------------------------------------------------------
\3\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized
as an open-end investment company or similar entity that invests in
a portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Index Fund Shares, listed
and traded on the Exchange under Nasdaq Rule 5705, seeks to provide
investment results that correspond generally to the price and yield
performance of a specific foreign or domestic stock index, fixed
income securities index or combination thereof.
\4\ The Commission approved Nasdaq Rule 5735 in Securities
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June
20, 2008) (SR-NASDAQ-2008-039). The Fund would not be the first
actively-managed fund listed on the Exchange; see Securities
Exchange Act Release No. 66489 (February 29, 2012), 77 FR 13379
(March 6, 2012) (SR-NASDAQ-2012-004) (order approving listing and
trading of WisdomTree Emerging Markets Corporate Bond Fund). The
Exchange believes the proposed rule change raises no significant
issues not previously addressed in those prior Commission orders.
\5\ The Commission has issued an order granting certain
exemptive relief to the Trust under the 1940 Act (the ``Exemptive
Order''). See Investment Company Act Release No. 29571 (January 24,
2011) (File No. 812-13601). In compliance with Nasdaq Rule
5735(b)(5), which applies to Managed Fund Shares based on an
international or global portfolio, the Trust's application for
exemptive relief under the 1940 Act states that the Fund will comply
with the federal securities laws in accepting securities for
deposits and satisfying redemptions with redemption securities,
including that the securities accepted for deposits and the
securities used to satisfy redemption requests are sold in
transactions that would be exempt from registration under the
Securities Act of 1933 (15 U.S.C. 77a).
\6\ See Registration Statement on Form N-1A for the Trust, dated
November 12, 2015 (File Nos. 333-123257 and 811-10325). The
descriptions of the Fund and the Shares contained herein are based,
in part, on information in the Registration Statement.
---------------------------------------------------------------------------
Van Eck Absolute Return Advisers Corporation will be the investment
adviser (``Adviser'') and the
[[Page 42769]]
administrator to the Fund. Van Eck Securities Corporation
(``Distributor'') will be the distributor of the Fund's Shares. The
Bank of New York Mellon (``Custodian'') will act as the custodian of
the Fund's assets and provide transfer agency and fund accounting
services to the Fund.
Paragraph (g) of Rule 5735 provides that if the investment adviser
to the investment company issuing Managed Fund Shares is affiliated
with a broker-dealer, such investment adviser shall erect a ``fire
wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio.\7\ In addition, paragraph
(g) further requires that personnel who make decisions on the open-end
fund's portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material, non-public information
regarding the open-end fund's portfolio.
---------------------------------------------------------------------------
\7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and its related personnel are
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
---------------------------------------------------------------------------
Rule 5735(g) is similar to Nasdaq Rule 5705(b)(5)(A)(i); however,
paragraph (g) operates in connection with the establishment of a ``fire
wall'' between the investment adviser and the broker-dealer reflects
the applicable open-end fund's portfolio, not an underlying benchmark
index, as is the case with index-based funds.
The Adviser is not a broker-dealer, although it is affiliated with
the Distributor, a broker-dealer. The Adviser has implemented a fire
wall with respect to its broker-dealer affiliate regarding access to
information concerning the composition and/or changes to the Fund's
(including the Subsidiary's) portfolio.
In the event (a) the Adviser becomes newly affiliated with a
broker-dealer or registers as a broker-dealer, or (b) any new adviser
or sub-adviser to the Fund is a registered broker-dealer or becomes
affiliated with a broker-dealer, it will implement a fire wall with
respect to its relevant personnel and/or such broker-dealer affiliate,
if applicable, regarding access to information concerning the
composition and/or changes to the portfolio and will be subject to
procedures designed to prevent the use and dissemination of material
non-public information regarding such portfolio. The Fund does not
currently intend to use a sub-adviser.
VanEck Vectors Long/Flat Commodity ETF
The Fund's investment objective will be to seek long-term capital
appreciation while seeking to manage volatility and reduce downside
risk during sustained market declines.
Principal Investment Strategies
The Fund will be an actively managed ETF that seeks to achieve its
investment objective by investing, under normal circumstances, in
exchange-traded commodity futures contracts and, under certain limited
circumstances, other commodity-linked instruments (``Other Commodity
Instruments'' \8\ and, collectively with exchange-traded commodity
futures contracts, ``Commodities Instruments'').
---------------------------------------------------------------------------
\8\ Other Commodity Instruments will include commodity-based
swap agreements cleared through a central clearing house or the
clearing house's affiliate (``Cleared Swaps''), forward contracts on
commodities, exchange-traded options on futures contracts, and
commodity-based swaps other than Cleared Swaps.
---------------------------------------------------------------------------
The Fund will invest in Commodities Instruments primarily through a
wholly-owned subsidiary of the Fund organized under the laws of the
Cayman Islands (``Subsidiary''). The Subsidiary will be advised by the
Adviser.
With respect to the exchange-traded commodity futures contracts and
options on futures contracts (if applicable) held, not more than 10% of
the weight \9\ of such futures contracts and options on futures
contracts in the aggregate shall consist of instruments whose principal
trading market is not a member of the Intermarket Surveillance Group
(``ISG'') or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement.
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\9\ To be calculated as the value of the contract divided by the
total absolute notional value of the Fund's futures contracts and
options on futures contracts.
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The Fund (directly or indirectly through the Subsidiary) will
normally invest in exchange-traded commodity futures contracts that are
components of the Morningstar[supreg] Long/Flat Commodity Index\SM\
(``Benchmark''), an index composed of futures contracts on 20 heavily
traded commodities across the energy, agriculture, industrial metals,
precious metals, and livestock sectors. The Adviser will employ a
rules-based investment approach when selecting Commodities Instruments
based upon momentum characteristics of the Commodities Instruments.
Commodities Instruments are assessed on a monthly basis by comparing
current prices to 12-month moving averages. The Fund's positions will
be either long \10\ or flat.\11\ The Fund intends to take long
positions in those Commodities Instruments whose prices are above their
12-month moving average. Conversely, the Fund intends to take flat
positions to manage volatility and reduce downside risk for those
Commodities Instruments whose prices are below their 12-month moving
average. The Fund will not be an ``index tracking'' ETF and may not
always invest in all of the Benchmark's components, or in the same
proportion, and it may invest in Commodities Instruments outside the
Benchmark.
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\10\ A ``long'' position is a position that will increase in
market price if the price of the commodity futures contract is
rising during the period when the position is open.
\11\ A ``flat'' position is a position that will not increase or
decrease in market price whether the price of the commodity futures
contract to which it relates is rising or falling.
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The Subsidiary will be an exempted company operating under Cayman
Islands law. It will be wholly-owned and controlled by the Fund and
will be advised by the Adviser. The Fund's investment in the Subsidiary
may not exceed 25% of the value of the Fund's total assets at each
quarter-end of the Fund's fiscal year. The Fund's investment in the
Subsidiary is expected to provide the Fund with exposure to Commodities
Instruments within the limits of the federal tax laws, which limit the
ability of investment companies like the Fund to invest directly in
such instruments. The Subsidiary will have the same investment
objective as the Fund and will follow the same general investment
policies and restrictions, except that unlike the Fund, it may invest
without limit in Commodities Instruments.
The Fund (and the Subsidiary, as applicable) expects to invest its
remaining assets in any one or more of the following: U.S. government
securities,\12\ money market funds, cash
[[Page 42770]]
and other cash equivalents,\13\ treasury inflation-protected
securities, sovereign debt obligations of non-U.S. countries and
repurchase agreements that provide liquidity, serve as margin or
collateralize the Fund's or the Subsidiary's investments in exchange-
traded commodity futures contracts.
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\12\ Such securities will include securities that are issued or
guaranteed by the U.S. Treasury, by various agencies of the U.S.
government, or by various instrumentalities, which have been
established or sponsored by the U.S. government. U.S. Treasury
obligations are backed by the ``full faith and credit'' of the U.S.
government. Securities issued or guaranteed by federal agencies and
U.S. government-sponsored instrumentalities may or may not be backed
by the full faith and credit of the U.S. government.
\13\ Cash equivalents will include banker's acceptances,
commercial paper, and certificates of deposit.
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The Fund also may invest directly in ETFs, exchange-traded closed
end funds (to the extent permitted by the 1940 Act, and certain
exemptive relief therefrom), and exchange-traded notes (``ETNs'') that
provide exposure to commodities.\14\
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\14\ An ETF is an investment company registered under the 1940
Act that holds a portfolio of securities. Many ETFs are designed to
track the performance of a securities index, including industry,
sector, country and region indexes. ETFs in which the Fund invests
will be listed and traded in the U.S. on registered exchanges. The
ETFs in which the Fund will invest include Index Fund Shares (as
described in Nasdaq Rule 5705), Portfolio Depositary Receipts (as
described in Nasdaq Rule 5705), and Managed Fund Shares (as
described in Nasdaq Rule 5735). The shares of ETFs in which the Fund
may invest will be limited to securities that trade in markets that
are members of the ISG, which includes all U.S. national securities
exchanges, or exchanges that are parties to a comprehensive
surveillance sharing agreement with the Exchange. An ETN is a
senior, unsecured, unsubordinated debt security issued by an
underwriting bank that, similar to other debt securities, has a
maturity date and is backed only by the credit of the issuer. ETNs
in which the Fund invests will be listed and traded in the U.S. on
registered exchanges. The ETNs in which the Fund will invest include
Securities Linked to the Performance of Indexes and Commodities,
Including Currencies (as described in Nasdaq Rule 5710), and Index-
Linked Exchangeable Notes (as described in Nasdaq Rule 5711). The
Fund will not hold inverse, leveraged, and inverse leveraged ETFs or
ETNs. Leveraged instruments are operated in a manner designed to
seek a multiple of the performance of an underlying reference index,
and inverse instruments are designed to seek investment results that
correspond to the inverse (opposite) of the performance of a
specified domestic equity, international or global equity, or fixed
income index or a combination thereof.
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As previously noted, the Subsidiary will be advised by the
Adviser.\15\ The Subsidiary will typically consider investing in
futures contracts of the Benchmark (``Index Commodity Contracts'') set
forth in the following table. The table also provides each instrument's
trading hours, exchange (``Futures Exchange'') and ticker symbol. The
table is subject to change.
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\15\ The Subsidiary will not be registered under the 1940 Act
and will not be directly subject to its investor protections, except
as noted in the Registration Statement. However, the Subsidiary will
be wholly-owned and controlled by the Fund and will be advised by
the Adviser. The Trust's board (``Board'') will have oversight
responsibility for the investment activities of the Fund, including
its investment in the Subsidiary, and the Fund's role as the sole
shareholder of the Subsidiary. The Adviser will receive certain fees
for managing the Subsidiary's assets and the Adviser will waive or
credit such amounts against the fees payable to the Adviser by the
Fund. It is expected that the Subsidiary will become party to the
existing custody agreement, transfer agency agreement and accounting
agreement of the Trust and Fund.
----------------------------------------------------------------------------------------------------------------
Contract ticker Exchange code Trading hours
(Bloomberg generic) (Bloomberg) \16\ Exchange name \17\ Commodity contract (ET)
----------------------------------------------------------------------------------------------------------------
BO1..................... CBT..................... Chicago Board of Soybean Oil/Crude.... 20:00-14:20
Trade.
C 1..................... CBT..................... Chicago Board of Corn/No. 2 Yellow.... 20:00-14:20
Trade.
CO1..................... ICE..................... ICE Futures Europe Crude Oil Brent/ 20:00-18:00
Commodities. Global Spot.
CL1..................... NYM..................... New York Mercantile Crude Oil WTI/Global 18:00-17:15
Exchange. Spot.
CT1..................... NYB..................... ICE Futures US Softs. Cotton/1\1/16\''..... 21:00-14:20
GC1..................... CMX..................... Commodity Exchange, Gold................. 18:00-17:15
Inc.
HG1..................... CMX..................... Commodity Exchange, Copper High Grade/ 18:00-17:15
Inc. Scrap No. 2 Wire.
HO1..................... NYM..................... New York Mercantile Heating Oil #2/Fuel 18:00-17:15
Exchange. Oil.
KC1..................... NYB..................... ICE Futures US Softs. Coffee `C'/Colombian. 04:15-13:30
LC1..................... CME..................... Chicago Mercantile Cattle Live/Choice 09:00-17:00
Exchange. Average.
QS1..................... ICE..................... ICE Futures Europe Gas-Oil-Petroleum.... 20:00-18:00
Commodities.
LH1..................... CME..................... Chicago Mercantile Hogs Lean/Average 09:00-17:00
Exchange. Iowa/S Minn.
NG1..................... NYM..................... New York Mercantile Natural Gas Henry Hub 18:00-17:15
Exchange.
XB1..................... NYM..................... New York Mercantile Gasoline Blendstock.. 18:00-17:15
Exchange.
S 1..................... CBT..................... Chicago Board of Soybeans/No. 2 Yellow 20:00-14:20
Trade.
SB1..................... NYB..................... ICE Futures US Softs. Sugar #11/World Raw.. 03:30-13:00
SI1..................... CMX..................... Commodity Exchange, Silver............... 18:00-17:15
Inc.
SM1..................... CBT..................... Chicago Board of Soybean Meal/48% 20:00-14:20
Trade. Protein.
W 1..................... CBT..................... Chicago Board of Wheat/No. 2 Soft Red. 20:00-14:20
Trade.
CC1..................... NYB..................... ICE Futures US Softs. Cocoa/Ivory Coast.... 04:45-13:30
----------------------------------------------------------------------------------------------------------------
As U.S. and London exchanges list additional contracts, as
currently listed contracts on those exchanges gain sufficient liquidity
or as other exchanges list sufficiently liquid contracts, the Adviser
may include those contracts in the list of possible investments of the
Subsidiary. The list of commodities futures and commodities markets
considered for investment may change over time.
---------------------------------------------------------------------------
\16\ The exchange codes listed are Bloomberg shorthand codes for
the corresponding exchanges. The New York Board of Trade is
currently owned by the ICE Futures Exchange; Bloomberg continues to
use NYB as its shorthand code for certain contracts formerly traded
on the New York Board of Trade.
\17\ All of the exchanges are ISG members.
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Other Investments
The Fund currently intends to invest first in exchange-traded
commodity futures contracts. Thereafter, if the Fund reaches the
position limits applicable to one or more Index Commodity Contracts or
a Futures Exchange imposes limitations on the Fund's ability to
maintain or increase its positions in an exchange-traded commodity
futures contract after reaching accountability levels or a price limit
is in effect on an exchange-traded commodity futures contract during
the last 30 minutes of its regular trading session, the Fund's
intention is to invest first in Cleared Swaps to the extent permitted
under the position limits applicable to Cleared Swaps and appropriate
in light of the liquidity in the Cleared Swaps market, and then, using
its commercially reasonable judgment, in Other Commodity Instruments.
[[Page 42771]]
The Fund may also invest in commodity-related foreign and domestic
equity securities.\18\
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\18\ Commodity-related foreign and domestic equity securities
will be comprised of exchange-traded common stocks of companies that
operate in commodities, natural resources and energy businesses, and
in associated businesses, as well as companies that provide services
or have exposure to such businesses.
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Commodities Regulation
The Commodity Futures Trading Commission (``CFTC'') has recently
adopted substantial amendments to CFTC Rule 4.5 relating to the
permissible exemptions and conditions for reliance on exemptions from
registration as a commodity pool operator.\19\ As a result of the
amendments and based on the Fund's and its Subsidiary's current
investment strategies, the Fund and the Subsidiary will each be a
``commodity pool'' and the Adviser, which is currently registered with
the CFTC as a commodity pool operator (``CPO'') and a commodity trading
adviser under the Commodity Exchange Act of 1936, is considered a CPO
with respect to the Fund and the Subsidiary. The Adviser is also a
member of the National Futures Association (``NFA''). The Fund will be
and the Adviser is subject to regulation by the CFTC and the Commission
and additional disclosure, reporting and recordkeeping rules imposed
upon commodity pools.
---------------------------------------------------------------------------
\19\ 17 CFR 4.5. See, e.g., 77 FR 11252 (Feb. 24, 2014); 77 FR
17328 (March 26, 2012).
---------------------------------------------------------------------------
Investment Restrictions of the Fund \20\
The Fund may not make loans, except that it may (i) lend portfolio
securities, (ii) enter into repurchase agreements, (iii) purchase all
or a portion of an issue of debt securities, bank loan or participation
interests, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is made
upon the original issuance of the securities, and (iv) participate in
an interfund lending program with other registered investment
companies, all in accordance with the 1940 Act.
---------------------------------------------------------------------------
\20\ Percentage limitations of the investment restrictions set
forth herein are measured at the time of investment.
---------------------------------------------------------------------------
The Fund may not borrow money, except as permitted under the 1940
Act, and as interpreted or modified by regulation from time to time.
The Fund also may not issue senior securities, except as permitted
under the 1940 Act, and as interpreted or modified by regulation from
time to time.
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment).\21\
The Fund will monitor its portfolio liquidity on an ongoing basis to
determine whether, in light of current circumstances, an adequate level
of liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets. Illiquid assets include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.\22\ An illiquid security is
generally considered to be a security that cannot be sold or disposed
of in the ordinary course of business within seven days at or near its
carrying value.
---------------------------------------------------------------------------
\21\ In reaching liquidity decisions, the Adviser may consider
factors such as but not limited to the following: The frequency of
trades and quotes for the security; the number of dealers wishing to
purchase or sell the security and the number of other potential
purchasers; dealer undertakings to make a market in the security;
and the nature of the security and the nature of the marketplace in
which it trades (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer).
\22\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also Investment Company Act
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970)
(Statement Regarding ``Restricted Securities''); Investment Company
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992)
(Revisions of Guidelines to Form N-1A). A fund's portfolio security
is illiquid if it cannot be disposed of in the ordinary course of
business within seven days at approximately the value ascribed to it
by the fund. See Investment Company Act Release No. 14983 (March 12,
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7
under the 1940 Act); Investment Company Act Release No. 17452 (April
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under
the Securities Act of 1933).
---------------------------------------------------------------------------
The Fund may not purchase any security if, as a result of that
purchase, 25% or more of its total assets would be invested in
securities of issuers having their principal business activities in the
same industry. This limit does not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
or securities of other investment companies.
Determination of Net Asset Value
The net asset value (``NAV'') per Share for the Fund will be
computed by dividing the value of the net assets of the Fund (i.e., the
value of its total assets less total liabilities) by the total number
of Shares outstanding. Expenses and fees, including the management fee,
will be accrued daily and taken into account for purposes of
determining NAV. The NAV of the Fund will be determined each business
day as of the close of trading (ordinarily 4:00 p.m. Eastern Time) on
the Nasdaq. Any assets or liabilities denominated in currencies other
than the U.S. dollar will be converted into U.S. dollars at the current
market rates on the date of valuation as quoted by one or more sources.
The values of the Fund's portfolio securities will be valued in
accordance with the Trust's valuation policies and procedures which may
be amended from time to time. Included herein is a description of how
various types of securities and instruments will be valued based on the
current valuation policies and procedures for the Trust. ETFs,
exchange-traded closed-end funds, ETNs, and commodity-related foreign
and domestic equity securities, will be based on the securities'
closing prices on local markets, when available. Due to the time
differences between the United States and certain countries, securities
on these non-U.S. exchanges may not trade at times when Shares of the
Fund will trade. In the absence of a last reported sales price, or if
no sales were reported, and for other assets for which market quotes
are not readily available, values may be based on quotes obtained from
a quotation reporting system, established market makers or by an
outside independent pricing service using data reflecting the earlier
closing of the principal markets for those securities. U.S. government
securities, treasury inflation-protected securities and sovereign debt
obligations of non-U.S. countries will normally be valued on the basis
of quotes from brokers or dealers, established market makers or an
outside independent pricing service. Short-term investments purchased
with a remaining maturity of 60 days or less, including repurchase
agreements and cash equivalents, will be valued on the basis of quotes
from broker dealers, established major market makers, an independent
pricing service or at amortized cost. Money market funds will be valued
at their reported closing NAV. Futures contracts and options on futures
contracts, which are traded on exchanges, will be valued at the current
settle price for like contracts acquired on the day on which the
futures contract will be valued as of the close of such exchanges.
Other Commodity Instruments not traded on exchanges will generally
be valued daily based upon quotations from market makers or by a
pricing service and in accordance with the Trust's valuation policies
and procedures. Prices obtained by an
[[Page 42772]]
outside independent pricing service may use information provided by
market makers or estimates of market values obtained from yield data
related to investments or securities with similar characteristics and
may use a computerized grid matrix of securities and its evaluations in
determining what it believes is the fair value of the portfolio
securities. If a market quotation for a security is not readily
available or the Adviser believes it does not otherwise accurately
reflect the market value of the security at the time the Fund
calculates its NAV, the security will be fair valued by the Adviser in
accordance with the Trust's valuation policies and procedures approved
by the Board of Trustees.
The Fund may also use fair value pricing in a variety of
circumstances, including but not limited to, situations when the value
of a security or instrument in the Fund's portfolio has been materially
affected by events occurring after the close of the market on which the
security or instrument is principally traded (such as a corporate
action or other news that may materially affect the price of a
security) or trading in a security or instrument has been suspended or
halted.
In addition, the Fund expects that it will fair value certain of
the foreign equity securities held by the Fund each day it calculates
its NAV, except those securities principally traded on exchanges that
close at the same time the Fund calculates its NAV. Accordingly, the
Fund's NAV may reflect certain portfolio securities' or instruments'
fair values rather than their market prices at the time the exchanges
on which they principally trade close. Fair value pricing involves
subjective judgments and it is possible that a fair value determination
for a security or instrument will be materially different than the
value that could be realized upon the sale of the security or
instrument. With respect to securities or instruments that are
principally traded on foreign exchanges, the value of the Fund's
portfolio securities or instruments may change on days when you will
not be able to purchase or sell your Shares.
Creation and Redemption of Shares
The Trust will issue and sell Shares of the Fund only to authorized
participants (``Authorized Participants'') and only in aggregations of
50,000 Shares (each, a ``Creation Unit''), on a continuous basis
through the Distributor, without an initial sales load, at their NAV
next determined after receipt, on any Business Day,\23\ of an order in
proper form.
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\23\ A ``Business Day'' with respect to the Fund is any day on
which Nasdaq is open for business. As of the date of this filing,
the Nasdaq observes the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day (Washington's Birthday), Good
Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
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The consideration for a purchase of Creation Units will generally
consist of cash and/or the in-kind deposit of a designated portfolio of
securities (``Deposit Securities'') and an amount of cash computed as
described below (``Cash Component''). The Cash Component together with
the Deposit Securities, as applicable, will be referred to as the
``Fund Deposit,'' which represents the minimum initial and subsequent
investment amount for Shares. The Cash Component will represent the
difference between the NAV of a Creation Unit and the market value of
Deposit Securities and may include a Dividend Equivalent Payment. The
``Dividend Equivalent Payment'' will enable the Fund to make a complete
distribution of dividends on the next dividend payment date, and will
be an amount equal, on a per Creation Unit basis, to the dividends on
all the securities held by the Fund (``Fund Securities'') with ex-
dividend dates within the accumulation period for such distribution
(the ``Accumulation Period''), net of expenses and liabilities for such
period, as if all of the Fund Securities had been held by the Trust for
the entire Accumulation Period. The Accumulation Period will begin on
the ex-dividend date for the Fund and will end on the next ex-dividend
date.
The Administrator, through the NSCC, will make available on each
Business Day, immediately prior to the opening of business on the
Exchange (currently 9:30 a.m. Eastern Time), the list of the names and
the required number of shares of each Deposit Security to be included
in the current Fund Deposit (based on information at the end of the
previous Business Day) as well as the Cash Component for the Fund. Such
Fund Deposit will be applicable, subject to any adjustments as
described below, in order to effect creations of Creation Units of the
Fund until such time as the next-announced Fund Deposit composition is
made available.
The identity and number of shares of the Deposit Securities
required for the Fund Deposit for the Fund may change as rebalancing
adjustments and corporate action events occur from time to time. In
addition, the Trust will reserve the right to accept a basket of
securities or cash that differs from Deposit Securities or to permit or
require the substitution of an amount of cash (i.e., a ``cash in lieu''
amount) to be added to the Cash Component to replace any Deposit
Security which may, among other reasons, not be available in sufficient
quantity for delivery or not be permitted to be re-registered in the
name of the Trust as a result of an in-kind creation order pursuant to
local law or market convention or which may not be eligible for
transfer through the Clearing Process, or which may not be eligible for
trading by a Participating Party (defined below).
In light of the foregoing, in order to seek to replicate the in-
kind creation order process, the Trust expects to purchase the Deposit
Securities represented by the cash in lieu amount in the secondary
market (``Market Purchases''). In such cases where the Trust makes
Market Purchases because a Deposit Security may not be permitted to be
re-registered in the name of the Trust as a result of an in-kind
creation order pursuant to local law or market convention, or for other
reasons, the Authorized Participant will reimburse the Trust for, among
other things, any difference between the market value at which the
securities were purchased by the Trust and the cash in lieu amount
(which amount, at the Adviser's discretion, may be capped), applicable
registration fees and taxes.
Brokerage commissions incurred in connection with the Trust's
acquisition of Deposit Securities will be at the expense of the Fund
and will affect the value of all Shares of the Fund; but the Adviser
may adjust the transaction fee to the extent the composition of the
Deposit Securities changes or cash in lieu is added to the Cash
Component to protect ongoing shareholders. The adjustments described
above will reflect changes, known to the Adviser on the date of
announcement to be in effect by the time of delivery of the Fund
Deposit, resulting from stock splits and other corporate actions.
In addition to the list of names and numbers of securities
constituting the current Deposit Securities of the Fund Deposit, the
Administrator, through the NSCC, will also make available (i) on each
Business Day, the Dividend Equivalent Payment, if any, and the
estimated Cash Component effective through and including the previous
Business Day, per outstanding Shares of the Fund, and (ii) on a
continuous basis throughout the day, the Indicative Optimized Portfolio
Value (``IOPV'').
To be eligible to place orders with the Distributor to create and
redeem
[[Page 42773]]
Creation Units of the Fund, an Authorized Participant must be (1) a
``Participating Party,'' i.e., a broker-dealer or other participant in
the Clearing Process through the Continuous Net Settlement System of
the NSCC; or (2) a DTC Participant; and, in either case, must have
executed an agreement with the Distributor and the Transfer Agent (as
it may be amended from time to time in accordance with its terms) with
respect to the purchases and redemptions of Creation Units. All
Creation Units of the Fund, however created, will be entered on the
records of the Depository in the name of Cede & Co. for the account of
a DTC Participant.
All orders to create Creation Units must be received by the
Distributor no later than the closing time of the regular trading
session on Nasdaq (``Closing Time'') (ordinarily 4:00 p.m., Eastern
Time) on the date such order is placed in order for creation of
Creation Units to be effected based on the NAV of the Fund as
determined on such date.
Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Distributor, only on a Business Day and only through a Participating
Party or DTC Participant who has executed a Participant Agreement. In
order to redeem Creation Units, an Authorized Participant must submit
an order to redeem for one or more Creation Units. All such orders must
be received by the Distributor in proper form no later than Closing
Time in order to receive the day's closing NAV per share.
To the extent the Fund's redemptions are effected in-kind, the
Administrator, through NSCC, makes available immediately prior to the
opening of business on the Exchange (currently, 9:30 a.m., Eastern
Time) on each day that the Nasdaq is open for business, the Fund
Securities that will be applicable (subject to possible amendment or
correction) to redemption requests received in proper form (as defined
below) on that day.
Unless cash redemptions are permitted or required for the Fund, the
redemption proceeds for a Creation Unit generally consist of Fund
Securities as announced by the Administrator on the Business Day of the
request for redemption, plus cash in an amount equal to the difference
between the NAV of the Shares being redeemed, as next determined after
a receipt of a request in proper form, and the value of the Fund
Securities, less the redemption transaction fee and applicable variable
fees. Should the Fund Securities have a value greater than the NAV of
the Shares being redeemed, a compensating cash payment to the Trust
equal to the differential plus the applicable redemption transaction
fee will be required to be arranged for by or on behalf of the
redeeming shareholder. The Fund reserves the right to honor a
redemption request by delivering a basket of securities or cash that
differs from the Fund Securities.
Availability of Information
The Fund's Web site (www.vaneck.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund that may be downloaded. The Fund's Web
site will include additional quantitative information updated on a
daily basis, including, for the Fund: (1) The prior business day's
reported NAV and closing price, and a calculation of the premium and
discount of the closing price against the NAV; and (2) data in chart
format displaying the frequency distribution of discounts and premiums
of the daily closing price against the NAV, within appropriate ranges,
for each of the four previous calendar quarters. On each business day,
before commencement of trading in Shares in the Regular Market Session
on the Exchange, the Fund will disclose on its Web site the Disclosed
Portfolio as defined in Nasdaq Rule 5735(c)(2) that will form the basis
for the Fund's calculation of NAV at the end of the business day.\24\
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\24\ Under accounting procedures to be followed by the Fund,
trades made on the prior business day (``T'') will be booked and
reflected in NAV on the current business day (``T+1''). Accordingly,
the Fund will be able to disclose at the beginning of the business
day the portfolio that will form the basis for the NAV calculation
at the end of the business day.
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On a daily basis, the Fund will disclose on the Fund's Web site the
following information regarding each portfolio holding, as applicable
to the type of holding: Ticker symbol, CUSIP number or other
identifier, if any; a description of the holding (including the type of
holding), the identity of the security or other asset or instrument
underlying the holding, if any; for options, the option strike price;
quantity held (as measured by, for example, par value, notional value
or number of shares, contracts or units); maturity date, if any; coupon
rate, if any; effective date, if any; market value of the holding; and
percentage weighting of the holding in the Fund's portfolio. The Web
site information will be publicly available at no charge.
In addition, a basket composition file, which includes the security
names and quantities required to be delivered in exchange for the
Fund's Shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the Exchange via
NSCC. The basket represents one Creation Unit of the Fund.
Also, for the Fund, an IOPV,\25\ defined in Rule 5735(c)(3) as the
``Intraday Indicative Value,'' that reflects an estimated intraday
value of the Fund's portfolio (including the Subsidiary's portfolio),
will be disseminated. Moreover, the Intraday Indicative Value,
available on the NASDAQ OMX Information LLC proprietary index data
service \26\ will be based upon the current value for the components of
the Disclosed Portfolio and will be updated and widely disseminated by
one or more major market data vendors and broadly displayed at least
every 15 seconds during the Regular Market Session.
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\25\ The IOPV will be based on the current value of the
securities and other assets held by the Fund and the Subsidiary
using market data converted into U.S. dollars at the current
currency rates. The IOPV price will be based on quotes and closing
prices from the securities' local market and may not reflect events
that occur subsequent to the local market's close. Premiums and
discounts between the IOPV and the market price may occur. The IOPV
will not necessarily reflect the precise composition of the current
portfolio of securities and assets held by a Fund at a particular
point in time or the best possible valuation of the current
portfolio. Therefore, the IOPV should not be viewed as a ``real-
time'' update of a Fund's NAV, which will be calculated only once a
day. The quotations of certain Fund holdings may not be updated
during U.S. trading hours if such holdings do not trade in the
United States.
\26\ Currently, the NASDAQ OMX Global Index Data Service
(``GIDS'') is the NASDAQ OMX global index data feed service,
offering real-time updates, daily summary messages, and access to
widely followed indexes and Intraday Indicative Values for ETFs.
GIDS provides investment professionals with the daily information
needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-
party partner indexes and ETFs.
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The dissemination of the Intraday Indicative Value, together with
the Disclosed Portfolio, will allow investors to determine the value of
the underlying portfolio of the Fund on a daily basis and will provide
a close estimate of that value throughout the trading day.
Intra-day, executable price quotations on the exchange-traded
assets held by the Fund and the Subsidiary, including futures
contracts, options on futures contracts, ETFs, ETNs, closed-end funds
and foreign and domestic equity securities are expected to be available
on the exchange on which they are traded. Intra-day, executable price
quotations on swaps, money market funds, forward contracts, U.S.
government securities, cash and other cash equivalents, treasury
inflation-
[[Page 42774]]
protected securities, sovereign debt obligations of non-U.S. countries
and repurchase agreements will be available from major broker-dealer
firms. Intra-day price information will also be available through
subscription services, such as Bloomberg and Reuters. Additionally, the
Trade Reporting and Compliance Engine (``TRACE'') of the Financial
Industry Regulatory Authority (``FINRA'') will be a source of price
information for certain fixed income securities held by the Fund.
Investors will also be able to obtain the Fund's Statement of
Additional Information (``SAI''), the Fund's Shareholder Reports, and
its Form N-CSR and Form N-SAR, filed twice a year. The Fund's SAI and
Shareholder Reports will be available free upon request from the Fund,
and those documents and the Form N-CSR and Form N-SAR may be viewed on-
screen or downloaded from the Commission's Web site at www.sec.gov.
Information regarding market price and volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services. The previous
day's closing price and trading volume information for the Shares will
be published daily in the financial section of newspapers. Quotation
and last sale information for the Shares will be available via Nasdaq
proprietary quote and trade services, as well as in accordance with the
Unlisted Trading Privileges and the Consolidated Tape Association plans
for the Shares. Quotation and last sale information for any underlying
exchange-traded equity will also be available via the quote and trade
service of their respective primary exchanges, as well as in accordance
with the Unlisted Trading Privileges and the Consolidated Tape
Association plans. Quotation and last sale information for any
underlying exchange-traded options will also be available via the quote
and trade service of their respective primary exchanges. Quotation and
last sale information for any underlying exchange-traded futures
contracts will be available via the quote and trade service of their
respective primary exchanges.
Information on the Morningstar Long/Flat Commodity
IndexSM will be available on the Morningstar Indexes Web
site (www.indexes.morningstar.com).
Initial and Continued Listing
The Shares will be subject to Rule 5735, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and/or continued
listing, the Fund and the Subsidiary must be in compliance with Rule
10A-3 \27\ under the Act. A minimum of 100,000 Shares will be
outstanding at the commencement of trading on the Exchange. The
Exchange will obtain a representation from the issuer of the Shares
that the NAV per Share will be calculated daily and that the NAV and
the Disclosed Portfolio will be made available to all market
participants at the same time.
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\27\ See 17 CFR 240.10A-3.
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Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund. Nasdaq will halt trading in the
Shares under the conditions specified in Nasdaq Rules 4120 and 4121,
including the trading pauses under Nasdaq Rules 4120(a)(11) and (12).
Trading may be halted because of market conditions or for reasons that,
in the view of the Exchange, make trading in the Shares inadvisable.
These may include: (1) The extent to which trading is not occurring in
the securities and other assets constituting the Disclosed Portfolio of
the Fund and the Subsidiary; or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. Trading in the Shares also will be subject to Rule
5735(d)(2)(D), which sets forth circumstances under which Shares of the
Fund may be halted.
Trading Rules
Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to Nasdaq's existing rules governing the
trading of equity securities. Nasdaq will allow trading in the Shares
from 4:00 a.m. until 8:00 p.m. Eastern Time. The Exchange has
appropriate rules to facilitate transactions in the Shares during all
trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum
price variation for quoting and entry of orders in Managed Fund Shares
traded on the Exchange is $0.01.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by both Nasdaq and
also the Financial Industry Regulatory Authority (``FINRA'') on behalf
of the Exchange, which are designed to detect violations of Exchange
rules and applicable federal securities laws.\28\ The Exchange
represents that these procedures are adequate to properly monitor
Exchange trading of the Shares in all trading sessions and to deter and
detect violations of Exchange rules and applicable federal securities
laws.
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\28\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows, and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed
regarding trading information it can obtain relating to the Shares,
other exchange-traded securities and other assets held by the Fund and
the Subsidiary, which include exchange-traded commodity-related equity
securities, exchange-traded futures contracts, exchange-traded options
on futures contracts, ETNs, ETFs and exchange-traded closed-end funds,
with other markets and other entities that are members of the ISG \29\
and FINRA may obtain trading information regarding trading in the
Shares, and such exchange-traded securities and other assets held by
the Fund and the Subsidiary from such markets and other entities. In
addition, the Exchange may obtain information regarding trading in the
Shares, and such exchange-traded securities and other assets held by
the Fund and the Subsidiary from markets and other entities that are
members of ISG, which includes securities and futures exchanges, or
with which the Exchange has in place a comprehensive surveillance
sharing agreement. Moreover, FINRA, on behalf of the Exchange, will be
able to access, as needed, trade information for certain fixed income
securities held by the Fund reported to FINRA's TRACE.
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\29\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio may trade on markets that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
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In addition, with respect to the exchange-traded futures contracts
and options on futures contracts held, not more than 10% of the weight
\30\ of such futures contracts and options on futures
[[Page 42775]]
contracts in the aggregate shall consist of instruments whose principal
trading market is not a member of ISG or is a market with which the
Exchange does not have a comprehensive surveillance sharing agreement.
Not more than 10% of the equity securities (including shares of ETFs,
closed-end funds, and commodity-related foreign and domestic equity
securities) and ETNs in which the Fund may invest will be invested in
securities that trade in markets that are not members of the ISG or are
not parties to a comprehensive surveillance sharing agreement with the
Exchange. In addition, the Exchange also has a general policy
prohibiting the distribution of material, non-public information by its
employees.
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\30\ To be calculated as the value of the contract divided by
the total absolute notional value of the Fund's futures contracts.
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Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (3) how and by whom the
information regarding the Intraday Indicative Value and the Disclosed
Portfolio is disseminated; (4) the risks involved in trading the Shares
during the Pre-Market and Post-Market Sessions when an updated Intraday
Indicative Value will not be calculated or publicly disseminated; (5)
the requirement that members deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (6) trading information.
In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Fund. Members purchasing Shares from the Fund for
resale to investors will deliver a prospectus to such investors. The
Information Circular will also discuss any exemptive, no-action and
interpretive relief granted by the Commission from any rules under the
Act.
Additionally, the Information Circular will reference that the Fund
is subject to various fees and expenses. The Information Circular will
also disclose the trading hours of the Shares of the Fund and the
applicable NAV calculation time for the Shares. The Information
Circular will disclose that information about the Shares of the Fund
will be publicly available on the Fund's Web site.
Continued Listing Representations
All statements and representations made in this filing regarding
(a) the description of the portfolio, (b) limitations on portfolio
holdings or reference assets, or (c) the applicability of Exchange
rules and surveillance procedures shall constitute continued listing
requirements for listing the Shares on the Exchange. In addition, the
issuer has represented to the Exchange that it will advise the Exchange
of any failure by the Fund to comply with the continued listing
requirements, and, pursuant to its obligations under Section 19(g)(1)
of the Act, the Exchange will monitor for compliance with the continued
listing requirements. If the Fund is not in compliance with the
applicable listing requirements, the Exchange will commence delisting
procedures under the Nasdaq 5800 Series.
2. Statutory Basis
Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act in general and Section 6(b)(5) of the Act in particular in
that it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and in general, to protect
investors and the public interest.
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in Nasdaq Rule 5735. The
Exchange represents that trading in the Shares will be subject to the
existing trading surveillances, administered by both Nasdaq and also
FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities laws.
The Adviser is affiliated with a broker-dealer and has implemented a
fire wall with respect to its broker-dealer affiliate regarding access
to information concerning the composition and/or changes to the Fund's
portfolio. In addition, paragraph (g) of Nasdaq Rule 5735 further
requires that personnel who make decisions on the open-end fund's
portfolio composition must be subject to procedures designed to prevent
the use and dissemination of material, non-public information regarding
the open-end fund's portfolio.
The Fund's and the Subsidiary's investments will be consistent with
the Fund's investment objective and although certain investments will
have a leveraging effect on the Fund, the Fund will not seek leveraged
returns. FINRA may obtain information via ISG from other exchanges that
are members of ISG.
In addition, the Exchange may obtain information regarding trading
in the Shares, other exchange-traded securities and other assets held
by the Fund and the Subsidiary from markets and other entities that are
members of ISG, which includes securities and futures exchanges, or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
Moreover, FINRA, on behalf of the Exchange, will be able to access,
as needed, trade information for certain fixed income securities held
by the Fund reported to FINRA's TRACE. With respect to the futures
contracts held, not more than 10% of the weight \31\ of such futures
contracts and options on futures contracts in the aggregate shall
consist of instruments whose principal trading market is not a member
of the ISG or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement. Not more than 10% of the
equity securities (including shares of ETFs and closed-end funds, and
commodity-related foreign and domestic equity securities) and ETNs in
which the Fund may invest will be invested in securities that trade in
markets that not members of the ISG or are not parties to a
comprehensive surveillance sharing agreement with the Exchange.
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\31\ To be calculated as the value of the contract divided by
the total absolute notional value of the Fund's futures contracts.
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The Fund will invest up to 25% of its total assets in the
Subsidiary as measured at each quarter-end of the Fund's fiscal year
end. The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment).
The Fund will use the fixed-income securities as investments and to
collateralize the Fund's or the Subsidiary's commodity exposure on a
day-to-day basis. The Fund may also invest directly in ETFs and
exchange-traded closed-end funds, that provide exposure to commodities,
equity securities and fixed income securities to the extent permitted
under the 1940 Act.
The proposed rule change is designed to promote just and equitable
principles
[[Page 42776]]
of trade and to protect investors and the public interest in that the
Exchange will obtain a representation from the issuer of the Shares
that the NAV per Share will be calculated daily and that the NAV and
the Disclosed Portfolio will be made available to all market
participants at the same time.
In addition, a large amount of information will be publicly
available regarding the Fund and the Shares, thereby promoting market
transparency. Moreover, the Intraday Indicative Value, available on the
NASDAQ OMX Information LLC proprietary index data service will be
widely disseminated by one or more major market data vendors at least
every 15 seconds during the Regular Market Session. On each business
day, before commencement of trading in Shares in the Regular Market
Session on the Exchange, the Fund will disclose on its Web site the
Disclosed Portfolio of the Fund and the Subsidiary that will form the
basis for the Fund's calculation of NAV at the end of the business day.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services, and
quotation and last sale information for the Shares will be available
via Nasdaq proprietary quote and trade services, as well as in
accordance with the Unlisted Trading Privileges and the Consolidated
Tape Association plans for the Shares. Intra-day price information will
be available through subscription services, such as Bloomberg and
Reuters.
The Fund's Web site will include a form of the prospectus for the
Fund and additional data relating to NAV and other applicable
quantitative information. Trading in Shares of the Fund will be halted
under the conditions specified in Nasdaq Rules 4120 and 4121 or because
of market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable, and trading in the Shares will
be subject to Nasdaq Rule 5735(d)(2)(D), which sets forth circumstances
under which Shares of the Fund may be halted. In addition, as noted
above, investors will have ready access to information regarding the
Fund's holdings, the Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale information for the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace.
As noted above, FINRA, on behalf of the Exchange, will communicate
as needed regarding trading information it can obtain relating to the
Shares, other exchange-traded securities and other assets held by the
Fund and the Subsidiary with other markets and other entities that are
members of the ISG and FINRA may obtain trading information regarding
trading in the Shares, other exchange-traded securities and other
assets held by the Fund and the Subsidiary from such markets and other
entities.
In addition, the Exchange may obtain information regarding trading
in the Shares, other exchange-traded securities and other assets held
by the Fund and the Subsidiary from markets and other entities that are
members of ISG, which includes securities and futures exchanges, or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
Additionally, FINRA's TRACE will be a source of price information
for certain fixed income securities held by the Fund. Furthermore, as
noted above, investors will have ready access to information regarding
the Fund's holdings, the Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale information for the Shares. For
the above reasons, Nasdaq believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed rule change will facilitate the listing and trading of an
additional type of actively-managed exchange-traded fund that will
enhance competition among market participants, to the benefit of
investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(a) By order approve or disapprove such proposed rule change; or (b)
institute proceedings to determine whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2016-086 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2016-086. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site https://www.sec.gov/rules/sro.shtml.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of Nasdaq. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
[[Page 42777]]
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2016-086 and should be submitted
on or before July 21, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-15454 Filed 6-29-16; 8:45 am]
BILLING CODE 8011-01-P
